2016 Medicare Part B Updates

2016 Medicare Part B Updates

January 20, 2016

LifeStyle Newsletter

First Quarter 2016


Understanding 2016’s Higher Medicare Part B Premiums

One-in-seven Medicare enrollees will pay higher Medicare Part B monthly premiums during 2016. Their premiums will be $121.80 each month, an increase of 16 percent. While that’s not good news, it’s better than it could have been.1


Part B is one component of Medicare’s Supplemental Medical Insurance (SMI). It helps pay the cost of physicians, outpatient hospital care, home healthcare, and other services needed by those who enroll in Medicare. The 2015 Annual Report of the Boards of Trustees said:2


“In 2014, Medicare covered 53.8 million people: 44.9 million aged 65 and older, and 8.9 million disabled… The SMI trust fund is adequately financed over the next 10 years and beyond because premium and general revenue income for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies. In 2016, however, a hold-harmless provision that restricts Part B premium increases for most beneficiaries is expected to cause a substantial increase in the Part B premium rate for other beneficiaries.”


The report estimated Part B premiums and deductibles would increase by an unprecedented 52 percent,3 rising from $104.90 in 2015 to $159.30 in 2016 for Medicare beneficiaries who were not subject to the hold-harmless provision.2, pg 32


The hold-harmless provision limits the dollar increase in Medicare beneficiaries’ premiums to the dollar increase in their Social Security benefits. Since there is no cost-of-living adjustment for Social Security in 2016, there can be no increase in premiums for about 70 percent of Medicare Part B participants.2, pg 32 (The hold-harmless provision has been invoked twice in the last 40 years.1)


The remaining 30 percent of beneficiaries will see premiums increase. The AARP reported 16 percent of these beneficiaries are low-income individuals whose premiums are paid by their states, so they will not pay higher premiums directly. The remaining 14 percent will pay higher premiums during 2016. This group includes those who:1


  • Pay higher-income Part B premiums
  • Pay Part B premiums directly to Medicare (those who do not have premiums deducted from Social Security benefits)
  • Pay permanent penalties because they did not sign up for Part B on time
  • Will enroll in Part B during 2016


The good news is these beneficiaries won’t pay $159.30, as originally estimated. The Bipartisan Budget Act of 2015, which was signed into law early November 2015, set the Part B monthly premium at $121.80 for 2016. That’s a 16 percent increase over 2015, but still a significant improvement over original estimates.3


The Kaiser Family Foundation reported Part D drug plan premiums, which are not subject to a hold-harmless provision, are likely to increase for all beneficiaries in 2016 (by 13 percent on average), so some Social Security recipients may see a reduction in benefits next year.3



1 http://www.aarp.org/health/medicare-insurance/info-2015/medicare-part-b-premiums-could-spike.html

2 https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reportstrustfunds/downloads/tr2015.pdf

3 http://kff.org/medicare/issue-brief/whats-in-store-for-medicares-part-b-premiums-and-deductible-in-2016-and-why/

4 http://www.food.com/recipeprint.do?rid=607

5 https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-sign-up-parts-a-and-b/when-sign-up-parts-a-and-b.html

6 http://kff.org/quiz/medicare-quiz/

7 http://www.ted.com/talks/jeff_iliff_one_more_reason_to_get_a_good_night_s_sleep/transcript?language=en#t-444511


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This material was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.